Boeing wins the battle, but the war continues with the controversial Air Force tanker program.

It looks like the ongoing battle between Northrop
Grumman/EADS and Boeing over the $35B Air Force tanker contract will go on for
at least another year. Northrop Grumman/EADS won
the KC-X tanker competition earlier this year and it was announced that the
Airbus A330-based KC-45 would replace the Air Force's existing fleet of 531
KC-135 tanker aircraft.

With foreign hands having a part in the design and
construction of the KC-45, some in Congress weren't too happy with the move.
"We should have an American tanker built by an American company with
American workers. I can't believe we would create French [and British] jobs in
place of Kansas jobs," said Todd Tiahrt, a congressman from Kansas.

Boeing filed
a formal protest against the Air Force's decision with the Government
Accountability Office (GAO) in March. Boeing contended that it deserved the
contract due to numerous errors and concessions made during the competition and
noted that it provided "75 years of unmatched experience building
tankers" and "offered the Air Force the best value and lowest risk
tanker for its mission".

It looks as though Boeing has quite a bit of pull in
Washington, because the GAO sided
with Boeing’s protest. "Our review of the record led us to conclude
that the Air Force had made a number of significant errors that could have affected
the outcome of what was a close competition," said the GAO in a statement.

"We recommended that the Air Force reopen discussions
... obtain revised proposals, re-evaluate the revised proposals, and make a new
source selection decision, consistent with our decision," the GAO
continued.

Further stacking future proceedings in Boeing's favor, the
GAO reported that the Air Force performed "unreasonable"
cost/performance analysis with regards to the Northrop Grumman/EADS entry
versus Boeing's competing entry. Had those errors not have been made; the GAO
concluded that Boeing would have been the low-cost champion of the competition,
and likely the overall winner.

The Air Force will in essence have to start the competition
all over again to satisfy the GAO's requests – in the mean time; the aging
KC-135 fleet will still take to the skies. "In theory, the air force has
60 days to answer. But in reality, it's obvious they're going to have to start
over," said Lexington Institute military analyst Loren Thompson.

EADS, as expected, wasn't exactly elated with the GAO's
decision. "Though we are disappointed, it's important to recognize that
the GAO announcement is an evaluation of the selection process, not the merits
of the aircraft," said EADA spokesman Louis Gallois.

"We will support our partner Northrop and remain
confident that the KC-45 is the aircraft best suited to make the Air Force's
critical mission requirements, as demonstrated by four previous competitive
selections."

Not surprisingly, Boeing is ecstatic about the ruling.
"We welcome and support today's ruling by the GAO fully sustaining the
grounds of our protest," said Boeing tanker group VP Mark McGraw. "We
look forward to working with the Air Force on next steps in this critical
procurement for our warfighters."

Supporters of Boeing's protest in Congress also welcomed the GAO's
decision. "The GAO's decision in the tanker protest reveals serious
errors in the Air Force's handling of this critically important competition. We
now need not only a new full, fair and open competition in compliance with the
GAO recommendations, but also a thorough review of -- and accountability for --
the process that produced such a flawed result," said Senator Carl Levin
(D-Michigan).

"The GAO did its work, and the Air Force is going to
have to go back and do its work more thoroughly," added Representative Ike
Skelton (D-Missouri).

You can read the GAO's full report including seven areas in
which it found the Air Force's decision to be flawed here.

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